The ECB minutes yesterday were slightly on the dovish side
|Market movers today
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On a day with few important data releases, the financial markets will be looking to signs from the Fed on the outlook for the economy and monetary policy, when US Fed chair William's speaks . The minutes from the January meeting showed that the Fed has become more upbeat on the US economy following the tax reform, which has since then been supplemented by more expansionary fiscal spending out look. Hence financial markets will closely watch for Fed speakers giving signs of a fourth rate hike being in play this year.
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In Norway, the oil investment survey is due, where we expect a solid upward revision of the estimate for 2018 given that a large number of field development plans have been submitted since the previous survey. However, this would still be in line with our relatively optimistic forecast for investment activity in the Norwegian oil sector (for more details, see the Scandi section next page).
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In Sweden, the Riksbank Minutes due for release at 09:30 will be scrut inized for indications as to how sensitive the Board is to further inflation disappointments (like the one earlier this week, for more details see Scandi section).
Selected market news
Asian equity markets are generally higher this morning, mirroring higher US markets yesterday. At the same time, US 10 year yields remained near their highest since 2014. Dallas Fed President Robert Kaplan spoke yesterday at an event in Vancouver, saying that FED policy is accommodative, but the rate path to a neutral monetary stance may be flatter and not as far away as the market may think, reiterating that he sees three rate hikes this year as appropriate, although evidence of rising inflation would affect his rate view.
In our view, the ECB minutes yesterday were slightly on the dovish side, but we keep our call on the revisit forward guidance in March: the Minutes said on the issue that ‘language pertaining to the monetary policy stance could be revisited early this year as part of the regular reassessment at the forthcoming monetary policy meetings. ' As we pointed to earlier, the QE flexibility is first in line with the minutes saying ‘some members expressed a preference for dropping the easing bias regarding the APP'. In line with our view, the ECB board members are not concerned about the exchange rate path through to inflation for now.
On Brexit, Prime Minister Theresa May yesterday gathered her top ministers for an eighthour session to get them to back her Brexit strategy. One of the key elements that appears to be on the table from the UK side is a " three basket approach", which would allow the UK to apply varying degrees of EU rules. The European Commission yesterday pre-empted the out come of T heresa May's meeting by saying that such plan would be the same as a ‘cherry picking' approach that the EU wants to avoid to preserve the integrity of the EU single market.. Theresa May is due to deliver a speech next week on how she sees the future trading relationship between the UK and EU post -Brexit . Trade talks with the EU are due to begin next month, which are set to be challenging.
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